Working papers from the Federal Reserve Bank of Dallas are preliminary drafts circulated for professional comment.

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1998 Working Papers

9805
The Rise of Goods-Market Competition and the Fall of Nominal Wage Contracting: Endogenous Wage Contracting in a Multisector Economy
John V. Duca and David D. VanHoose
Abstract: This paper shows how heterogeneity wage-setting and a link between nominal wage flexibility andg goods-market competition rise in a multisector economy that is affected by aggregate and sector-specific shocks. Aggregate volatility increases the variance of real contract wages, whereas sectoral volatility increase the relative variance of real Walrasian wages. Given this tradeoff, the prevalence of nominal wage contracting reflects both the relative volatility of aggregate versus sectoral disturbances and the overall degree of goods-market market competition. We find that these variables help explain the decline in unionization (a proxy for contracting in) the United States.

9804
On the Political Economy of Immigration and Income Redistribution
Jim Dolmas and Gregory W. Huffman
Abstract: In this paper, we study several general equilibrium models in which the agents in an economy must decide on the appropriate level of immigration into the country. Immigration does not enter directly into the native agents' utility functions, and natives have identical preferences over consumption goods. However, natives may be endowed with different amounts of capital, which alone gives rise to alternative levels of desired immigration, We show that the natives' preferences over desired levels of immigration are influenced by the prospect that new immigrants will be voting in the future, which may lead to higher taxation to finance government spending from which they will benefit. We also show that changes in the degree of international capital mobility, the distribution of initial capital among natives, the wealth or poverty of the immigrant pool, and the future voting rights and entitlements of immigrants can all have dramatic effect on the equilibrium immigration and taxation policies.

9803
What Should Economists Measure? The Implications of Mass Production vs. Mass Customization
W. Michael Cox and Roy J. Ruffin

9802
How Well Does the Beige Book Reflect Economic Activity? Evaluating Qualitative Information Quantitatively
Nathan S. Balke and D'Ann Petersen
Abstract: Eight times a year, approximately two weeks before every FOMC meeting, the Federal Reserve releases a description of economic conditions in the twelve Federal Reserve districts. Called t he Beige Book, this description relies primarily on surveys and anecdotal evidence gathered by the twelve district banks. In this paper, we read and numerically scored past Beige Books in order to determine the extent to which the descriptions in these books accurately reflect current economic activity as measured by quarterly real GDP growth. We find that both in sample and out-of-sample the quantitative Beige Book indices do have significant predictive content for current and next quarter real GDP growth. Furthermore, the Beige Book has information about current quarter real GDP growth not present in other indicators such as the Blue Chip Consensus forecast or time series models that use real-time data.

9801
Revenue-Maximizing Monetary Policy
Joseph H. Haslag and Eric R. Young
Abstract: In this paper, we examine the impact that changes in the rate of money creation and reserve requirements have on real seigniorage revenue. We consider two additional features that differ from previous analyses. First, the model economies grow endogenously, and that growth depends on the accumulation of intermediated capital. Second, agents have two means of financing; one is bank deposits against which reserves must be held and the other is a nonbank intermediary. Thus, growth-rate effects and financing substitution defects are both present, and one can assess the quantitative importance of each factor.